- GBP/USD prints mild losses as it pushes back buyers after four-day ruling.
- Fears of UK’s recession joins hawkish Fed bets to underpin bearish bias.
- UK jobs report, inflation data may entertain traders ahead of “Super Thursday”.
- US CPI for November could favor FOMC hawks in case of firmer outcome.
GBP/USD holds lower ground near the intraday bottom as it seesaws near 1.2260 during the first negative in five heading into Tuesday’s London open. In doing so, the Cable pair justifies economic pessimism surrounding the UK, as well as hawkish bets on the US Federal Reserve’s (Fed) next moves, ahead of the key British employment numbers and the US inflation data.
On Monday, the UK’s Gross Domestic Product (GDP) for October rose to 0.5% MoM versus -0.1% expected and -0.6% prior. With this, the UK GDP came in above the pre-COVID-19 level of 0.4% which was flashed in February 2020. Further details mentioned that the Manufacturing Production growth rallied by 0.7% compared to -0.1% market consensus and 0.0% previous readouts while the Industrial Production marked a positive surprise of 0.0% % MoM for October compared to -0.3% expected and 0.2% prior. Following the data, UK Finance Minster Jeremy Hunt said in a BBC News interview on Monday that the economy is “likely to get worse before it gets better.”
On the other hand, the US Dollar cheered Friday’s upbeat data but the mixed signals for today’s US Consumer Price Index (CPI) for November limited the Greenback’s further upside. That said, the one-year inflation precursor from the New York Fed slumped the most on record but contrasts with the upbeat inflation expectations for the 5-year and 10-year reported by the St. Louis Federal Reserve (FRED) data. On the same line, the last week’s downbeat prints of the United States Producer Price Index (PPI) also hinted at softer US inflation but the University of Michigan’s (UoM) Consumer Sentiment Index, as well as the US ISM Services PMI and inflation expectations from the UoM Survey, suggested firmer prints of the US CPI.
It should be noted that the fears surrounding the escalation in Russia versus the West tussles, mainly due to the oil price cap, join the Sino-American woes over the US sanctions on Chinese diplomats, to weigh on the market sentiment. However, China-linked Covid optimism restricts the bearish bias surrounding the GBP/USD pair.
While portraying the mood, US Treasury bond yields print the first daily loss in four while the S&P 500 Futures print mild losses near 4,020 despite a strong Wall Street close on Monday.
Looking forward, the UK Claimant Count Change for November, expected -13.3K versus 3.3K prior, will join the ILO Unemployment Rate for three months to October, likely increasing to 3.7% versus 3.6% prior, to direct immediate GBP/USD moves. Following that, the US CPI, expected 7.3% YoY, versus 7.7% prior figure, will be crucial for near-term directions. It should be noted that the CPI ex Food & Energy appears to be the key and is expected to be unchanged at 0.3% MoM, which can please the DXY buyers and weigh on GBP/USD prices in case of a firmer print.
Technical analysis
A clear downside break of the two-week-old ascending trend line, around 1.2270 by the press time, becomes necessary for the GBP/USD bears to keep the reins. However, recovery moves remain elusive unless crossing a downward-sloping resistance line from December 05, close to 1.2315 at the latest.